Here’s what it’s like inside Amazon the week before Prime Day
Elizabeth Weise
SEATTLE—At Amazon headquarters here, two floors of conference rooms are outfitted as war rooms, the better to absorb the crushing blow of 85 million Prime shoppers feverishly tapping on the best slow cooker deals.
Prime Day (or Prime Day plus six hours) is almost here.
What started as an experiment to shake-up the shopping doldrums of July, with perhaps a sprinkle of inspiration from Alibaba's wildly successful Single's Day, has turned into one of Amazon's biggest sales days.
Last year, analysts estimate Prime Day sales totaled between $500 million and $600 million, or 1.5% of its third quarter sales — compared with the $3.34 billion spent online by Americans this past Black Friday at retailers. Amazon (AMZN), which does not release sales figures for the event, said they surpassed the prior year's Prime Day by more than 60% worldwide.
While this year’s Prime Day will almost certainly out-perform last year’s, in the bigger picture Prime Day just isn't as relevant as holiday sales in November and December, said Alasdair McLean-Foreman, founder of Teikametrics, a company that provides data analytics and optimization technology for sellers on e-commerce platforms.
Sales are by no means the only important metric. At heart, Prime Day is “another excellent branding opportunity to own consumer mind share,” McLean-Foreman said.
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Bursting digital shopping carts help Amazon and the tens of thousands of companies that sell on its site to level out demand over the year, adding a nice bump of sales in July when things are typically flat, says Gene Alvarez, an analyst who follows the company for Gartner.
It’s also a chance for Amazon to tout voice-ordering and to get more people engaged with its Echo voice-operated devices.
But mostly it’s a chance for Amazon to gather information, both in general and as a kind of stress test for the holidays.
“Prime Day is about experimenting and learning more about the customer experience and willingness to shop in new ways,” Alvarez said.
Amazon is prepping for this year's Prime Day, which starts Monday at 9 PM Eastern and runs for 30 hours across 13 countries, to be a big one.
Amazonians (Amazon's internal name for its workers) who work on Prime are expected to block off June and much of July and take their summer vacations after the dust has cleared.
Code Name: Pinata
It’s all a long way from its beginnings as a doldrums of July sale, originally code-named Piñata.
The first Prime Day in 2015 got off to a somewhat inauspicious start. The team focused on the event had taken over a small conference room decorated with Piñata cutouts as its operations center.
Prime hit first in Japan, 16 hours ahead of Seattle. As the sale began there, customers rushed online to start buying and the Amazon.jp site promptly crashed.
Greg Greeley, Amazon’s vice president for Prime, literally fell off his chair as he lunged to deal with the problem. The team got the site up and running again in two minutes but the magnitude of what they’d launched was clear.
“I got on the phone with AWS and I told them, ‘When the sun comes up here, this is going to be huge,’” he told USA TODAY last week.
The first Prime Day in 2015 came about as the company was casting about for a celebration for its twentieth anniversary, though it resembled Singles’ Day in China, an obscure event for bachelors that the Chinese digital giant Alibaba turned into a cultural event beginning in 2009, selling $17.8 billion in goods last year.
Just as with Black Friday deals, the question for consumers is always whether they’re getting deals or duds. Amazon’s first try at Prime Day in 2015 was panned by some because too many deals seemed instead to be merchants clearing out unsold inventory, with Twitter calling out garage-sale like goods such as shoe horns and granny panties.
The next year Prime Day felt a lot more like Black Friday, though an analysis by The Wirecutter found that while there were thousands of deals, few were what it termed "great deals."
This year, Amazon is pledging that price for all its limited-time lightning deals will be the lowest for that item offered on its site in the last 365 days.
It won't be the only game in town. JCPenney, Kohl's and Macy's are all offering exclusive discounts before and during Prime Day, though Walmart, Target and Lowe's are among the big names who appear to be skipping the event.
In the first two years Prime Day was also a big enticement for customers to sign up for Amazon’s Prime membership service, which offers free two-day shipping and same-day shipping in many cities plus a host of perks.
Prime members are a major sweet spot for Amazon. According to figures released last week by Consumer Intelligence Research Partners, there are now 85 million highly remunerative Prime members in the United States, up from 65 million a year ago. Once in the Amazon eco-system they spend on average about $1,300 per year, compared to about $700 per year for non-member customers.
Forrester’s Amazon analyst Brendan Witcher expects the company to heavily promote its Echo family of voice-activated devices as it continues efforts to build-out its already substantial lead in voice assistants. This includes the new Echo Show, which comes with a 7" screen.
“It wouldn't surprise me if almost every step of the purchasing journey will include some mention of Amazon Echo,” he said.
Amazon’s overall goal, which Prime Day contributes to, is to do with retail what Apple did with music – build an ecosystem of delivery that will become an ecosystem of buying, Witcher said.
The work that Amazon has put into Prime Day is paying off for the third-party sellers on Amazon’s site, who now make up more than 50% of units sold by the company.
Austin, Texas-based Silk Innovation sells mobile phone cases. The company set its sales targets in the spring, ordering from China and having the products shipped directly to Amazon fulfillment centers.
CEO Matt Altschul expects a 25% jump in sales in July due to Prime Day.
“I wish I had a story to tell you that everything’s wild and we all had to work our butts off, but I don’t," he said. "It’s the beauty of Amazon’s automation.”